Redbox (NASDAQ:RDBX) has been one of the most impressive movers in the market this past month. Shares of the embattled DVD rental company absolutely tanked after its reverse special purpose acquisition company (SPAC) merger last year. Specifically, RDBX stock dropped more than 80% from its initial offering price of $10, trading below $2 for much of April. Since then, however, shares have seen a massive turnaround.
Yesterday, Redbox investors saw shares breach the $10 mark for the first time this year, surging on a variety of factors. Essentially, the company has become a retail favorite, with speculation around a potential short squeeze taking off.
However, today RDBX stock has given up most of its gains, sinking approximately 20% in late afternoon trading. So, let’s dive into what’s driving this rather impressive volatility with the de-SPAC stock today.
Why Is RDBX Stock Plunging Today?
First, let’s take a step back and look at what drove most of the interest in Redbox to start. After all, DVD rentals isn’t what many would consider to be a “booming” business. As theaters reopen and we go back to somewhat-normal life, there’s a reason why so many have been selling this stock heavily until recently.
Last week, Redbox announced that an additional round of financing was being made available via a previous agreement with HPS Investment Partners. This $50 million financing deal appears to have provided investors with some assurance of near-term runway. Given the company’s current financial condition, some sort of bump could be expected.
However, the fact that RDBX stock soared fivefold in a matter of weeks really isn’t normal, either. It’s clear that perhaps there’s a turnaround angle with this company. But secular headwinds may be hard to overcome, with significant uncertainty remaining.
All told, Redbox appears to be one of the latest retail favorites, with impressive buying volume currently taking over. Whether today’s price action suggests the momentum rally is reverting remains unclear. Regardless, Redbox’s risk profile looks extremely elevated right now.
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On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.